Monday, July 5, 2010

A Predator economist defends the "profession"

Kartik Athreya of the Richmond Federal Reserve Bank has written a particularly silly piece entitled, Economics is hard. Don't let bloggers tell you otherwise.

Now I would be the last person to argue that economics is simple--in fact, its complexity is what makes it so attractive for me.  And Predator economics is especially difficult because it requires such a large component of a willing suspension of disbelief.

But that is not Kartik's point.  Economics is difficult because there is so much advanced math to learn.  Therefore, unless someone has been trained into the high priesthood of economics to the Ph.D. level at an approved institution (Harvard, Chicago, Stanford, etc.) that person should not be able to comment on economics.

Let's get some things perfectly clear.

1) The economics profession stands utterly discredited and disgraced these days because of the 40,000 practicing economists, about 10 are on record as predicting the latest economic calamity.

2) The current generation of economic "geniuses" also gave us the Harvard team that so wildly misadvised the Yeltsin government in the early 1990 that the country was plunged into such ruin that even life expectancy figures fell rapidly.  Of course, these geniuses like Jeffrey Sachs had been honing their destruction in places like Bolivia and Poland so the poor Russians had no right to feel targeted.

One can argue (and Naomi Klein does) that this rotten economic advice isn't because of stupidity, but because these economists are trained to trigger catastrophes so the vultures can clean up.  And the vultures DID clean up in Russia so this argument is not without merit.  But I am not much of a conspiracy buff and have met with many economists in life and believe that mostly they are true believers who are stuck on stupid.

3) Economics (as it is currently being taught) may seem hard, but that is only because the math boot camp makes it seem difficult.  It is easy to poke fun at the econ profession because the only skill set they possess is the ability to do fast algebra.  As a result, they understand almost nothing about the real economy  (cf. Michael Boskin who said that it made no difference if a country made potato chips or computer chips.)  And if all you do is sit around all day doing fast algebra, then LOTS of people have more difficult jobs than economists--including at least 75% of the Producer Class.

Kartik Athreya should not get so arrogant.
Did the Fed Economist Slam Bloggers for the Same Reason that Fundamentalist Priests Slammed the Printing Press?
Kartik Athreya of the Richmond Federal Reserve Bank argues that bloggers are stupid, and that only PhD economists have a right to say anything about economics policy. This distinction is a little ridiculous, given that many of the world’s top PhD economics professors are bloggers.
And it must be noted that the Fed ignores any PhD economist who exercises any scintilla of independence.
For example, all of the PhD economists who say the economy won't recover unless we break up the giant banks are ignored (even if they happen to be former Federal Reserve chairmen or Fed Bank presidents).
And well-known PhD economist James Galbraith is ignored when he argues that - because fraud caused the economic crisis - economists should move into the background, and "criminologists to the forefront".And of course, the PhD economists calling for a complete audit of the Fed or - heaven forbid - a challenge to Fed powers, are ignored.
In fact, as I pointed out in December, most economists don't exercise any independent thinking because economists are trained to ignore reality:
As I have repeatedly noted, mainstream economists and financial advisors have been using faulty and unrealistic models for years. See this, this, this, this, thisand this.
And I have pointed out numerous times that economists and advisors have a financial incentive to use faulty models. For example, I pointed out last month:
The decision to use faulty models was an economic and political choice, because it benefited the economists and those who hired them.
For example, the elites get wealthy during booms and they get wealthy during busts. Therefore, the boom-and-bust cycle benefits them enormously, as they can trade both ways. more

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